In Saigon, supply fails to meet demand for mid-range apartments

Second quarter demand for mid-range apartments was high in Saigon, but they were in short supply for various reasons.

Data compiled by Savills Vietnam, a global property services provider, shows transactions for apartments priced under VND20 million ($860) per square meter surged 38 percent year-on-year in the second quarter to 2000.

However supply in this segment dropped 8 percent during the same period.

CBRE Vietnam, a commercial real estate services and investment firm, said more than 6,100 new apartments were put on sale in the city in the second quarter, down 36 percent year-on-year.

The strongest decrease of 62 percent was recorded in the mid-range segment - apartments ranging between VND18.6-34.9 million per square meter (as defined by CBRE Vietnam).

Explaining the supply shortage, CBRE Vietnam cited the deadly fire at the Carina apartment complex last March that killed 13 people, which prompted authorities to tighten their management of all such development projects, leading to more complicated and longer procedures.

The fire also caused property investors to be more cautious in launching their projects.

Another factor was the State Bank of Vietnam’s policy to limit lending to the real estate and construction sectors as part of efforts to control bad debts and maintain credit growth in the sectors within safe limits.

However, Ngo Quang Phuc, general director of the Phu Dong Group, a real estate developer, said: “There are actually three reasons for the year-on-year decrease in the supply of mid-range apartments: availability of land for developing new projects, higher land prices, and long procedures to get permission for implementing new projects.”

Regarding current market demand, Phuc said that apartments priced under VND2 billion ($90,000) are now the most wanted and that consumers of this segment do not usually let outside factors affect their decision to buy.

CBRE Vietnam has noted that investors have caught up with the trend, with mid-range apartments making up 80 percent of the total supply now, compared to just 30-35 percent in 2007.

Savills Vietnam, meanwhile, has predicted that the supply of apartments in this range will keep rising in the future as more and more young people want to own small apartments.